Payday Loans: Firms Face Tougher Ad Rules

Payday loans firms are facing tighter advertising rules as the Government tries to ensure that companies do not take advantage of people drowning in debt.

The plans include limiting the number of adverts firms are allowed to put out per hour, the times they can advertise and forcing them to make sure that interest rates are clearly displayed.

The Government will work with the Advertising Standards Authority and the industry to make sure advertising does not tempt consumers into taking out payday loans that they cannot afford.

The clampdown emerged as the Office of Fair Trading (OFT) prepares to publish the results of a wide-ranging probe into the payday lending industry later.

The OFT has carried out spot checks of 50 major lenders and obtained information from all 240 lenders in the market.

The regulator said in its interim report last autumn that formal investigations have been launched into several firms over their debt collection methods.

Charities have reported rocketing numbers of complaints about payday lenders from borrowers.

The Money Advice Trust (MAT) recently said that complaints about payday loans have doubled year-on-year to reach a record of 20,000 across 2012.

The charity warned that "something is drastically wrong" with the way that expensive loans are being dished out to people who cannot afford them, with lenders often rolling over loans.

New regulator the Financial Conduct Authority (FCA), which will oversee the consumer credit market from next year, will prioritise tighter rules on payday lending that could come into effect from April 2014.

The FCA's rules will be binding and if they are broken the regulator will have tough enforcement powers including imposing unlimited fines and the ability to claw consumers' money back.

The Government is also planning to do more to encourage greater communication within the industry to stop consumers taking out multiple loans from different lenders.

Sajid Javid, Economic Secretary to the Treasury, said: "The Government is introducing a fundamentally new approach to regulating consumer credit, which will ensure that irresponsible firms and bad practice will have no place in the consumer credit marketplace.

"Consumers can have greater confidence that the new FCA will intervene early and decisively in their interests - thanks to its more focused remit, objectives and powers."

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Sharp Deal: Shares Soar As Samsung Invests

Samsung has announced a 10.4 billion yen (£70m) capital injection in Sharp, making it the Japanese firm's largest foreign shareholder.

The South Korean company, which will take a 3% stake in its rival, will secure a supply of Sharp's liquid-crystal display technology for its mobile phones and tablets as part of the deal.

Market speculation about the transaction - which was confirmed after the Asian markets closed - sent Sharp's shares soaring more than 17%, before closing 14% higher.

The company said the deal would help shore up its troubled finances while boosting "mutual trust" between the firms.

Samsung added that the investment "would lay a firm foundation for Samsung to secure a steady supply of LCD panels from diversified sources".

Samsung's Galaxy S3 smartphone has shipped around 40m units worldwide

The deal is significant for both Sharp - which last year warned about its chances of survival - and Japan's once-dominant manufacturing industry.

Hiroshi Sakai, chief economist at SMBC Friend Securities, said: "For Japan, it is symbolic and shocking news as Sharp, which used to be a frontrunner in the panel industry, is struggling while its rival Samsung has raced past it."

The deal is the latest investment in Japan's companies by Samsung after it acquired a 5% stake in Wacom, which makes digital pen technology, in January.

Mr Sakai added that deals between Japanese and foreign rivals are likely to increase, as a strong yen, weak demand in export markets and fierce competition hit business.

"Many other Japanese electronics makers are struggling to survive," he said.

"But they still have attractive technologies and some foreign rivals are quite interested in them."

It is not just Sharp which is struggling to compete. Sony plans to sell its headquarters in Manhattan and a major building in Tokyo to raise money, and Panasonic is also restructuring its finances.

Sharp has been attempting to raise capital as part of its turnaround plan, and in February said its loss in the nine months to December had doubled to over 420 billion yen (£3bn).

In December it announced investment from US-based Qualcomm to jointly develop future display technology, and has also been in talks with Taiwan-based Hon Hai Precision Industry to raise capital.

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New Car Sales Up For 12th Successive Month

New car sales rose for the 12th successive month in the UK in February, bucking the market trend of falling demand across Europe.

More follows...

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Funding For Lending Credit Cut Sharply

British lenders taking part in a Bank of England scheme to boost firms' and households' access to credit cut lending sharply in the last three months, official statistics have revealed.

The lower than expected Funding for Lending Scheme (FLS) figures have dampened hopes that the project could help revive economic growth.

The BoE announced the scheme jointly with the Government in June 2012, as a way to unblock a credit log-jam which some economists say is a big factor behind Britain's weak economic recovery.

Banks and building societies cut lending by a net £2.425bn between October and December.

The figure compares to an increase of around £1bn in the first months of the FLS's operation.

Total net lending by banks and building societies taking part in the scheme - which includes all major British lenders apart from HSBC - is now down by £1.502bn since June 30.

The bank said that the scheme's benefits will not be fully clear until later in 2013.

"I would not expect to see a return to rising aggregate quantities until we start getting data for 2013 at the earliest," the bank's Paul Fisher said.

Taxpayer-backed lenders Royal Bank of Scotland and Lloyds Banking Group saw lending fall, despite drawing money from the scheme.

Lloyds has drawn £3bn so far, but lending fell by £3.1bn last quarter, while RBS has taken £750m, but its lending still fell by £1.7bn.

Prime Minister David Cameron's official spokesman said that the Government and the BoE had always made clear that it would take some time before the impact of the Funding for Lending scheme was felt, and that it was not expected as early as the fourth quarter of 2012.

"I think the Bank of England at the time of the launch of the policy was clear that it would take some time for the impact of the policy to be fully felt," the spokesman said.

"The most recent figures for lending in the economy, for January - the first month of Q1 2013 (the first quarter of 2013) - show that lending to the economy increased in January.

"I think we are also seeing the impact of the Funding for Lending scheme through lower borrowing costs. I think we are seeing evidence of the policy having a clear impact."

But shadow chancellor Ed Balls said: "These are deeply disappointing figures. Net lending is actually down since the Funding for Lending scheme started and down by £2.4bn in the final three months of 2012.

"And the Bank of England's own figures show that net lending to businesses fell by £4.5bn in the last quarter."

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New FSA Rules Prompt Internet Bank Rethink

By Mark Kleinman, City Editor

A new retail bank which has been struggling to secure funding and regulatory approval for more than three years has restarted talks with potential investors, buoyed by new rules governing start-up lenders.

I have learnt that Home & Savings Bank, which has been seeking as much as £250m of external capital since 2009, has in recent weeks resumed canvassing private equity firms, hedge funds and wealthy individuals about backing its launch plans.

The company, which would be a telephone and internet-based lender, is the brainchild of a group of former bank executives and Martin Finegold, the boss of Cambridge Place Asset Management, a London-based hedge fund.

People familiar with Home & Savings Bank's business plan said it had scaled back its ambitions and was now aiming to raise between £100m and £150m.

The nascent bank's management team includes Stuart Sinclair, former head of Tesco Personal Finance, and Peter Birch, one-time head of Abbey National.

Its new fundraising objective has been galvanised by the imminent publication of guidelines by the Financial Services Authority (FSA), which will allow banking start-ups to operate with much less capital than established high street rivals.

Mr Finegold's fund has already burned through millions of pounds in costs incurred by the development of Home & Savings Bank.

Over a three-year period it has held talks with dozens of possible investors, including Advent International and Blackstone, the buyout firms, and Magnetar Financial, the hedge fund. Home & Savings Bank also tried to pursue a stock market flotation but without success.

All of those discussions proved fruitless amid what many analysts see as a vicious circle hindering such embryonic projects: regulators will not approve new lenders until they have sufficient capital, while investors are reluctant to commit capital when there is uncertainty about whether a bank will receive regulatory approval.

Since the financial crisis a number of new retail banks have launched in Britain, the most prominent of which has been Metro Bank. Despite its public relations success, however, even it has made only modest competitive in-roads against the likes of Barclays, Lloyds Banking Group and Royal Bank of Scotland.

Last month, Sky News revealed that talks over the FSA reforms were being held up by demands from the Treasury to accelerate further the timetable for authorising new banks.

A spokesman for Home & Savings Bank declined to comment.

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China Spending Billions More On Defence

By Mark Stone, China Correspondent

China is to increase its defence budget spending by 10.7%, the country's government has announced.

The increase means a total of RMB720bn (£76.4bn) will be allocated to the Chinese military. 

The announcement said: "Funds will be used to support efforts to improve the working and living conditions of officers and enlisted personnel, make the armed forces more mechanised and information-based, and safeguard national security."

The announcement comes on the first day of China's National People's Congress (NPC).

The annual event holds more significance this year because it coincides with the once-in-a-decade leadership transition in the ruling Communist Party.

Some 3,000 delegates from provinces around the country gather in Beijing's Great Hall of the People for the 12-day event. 

Together they create the world's largest parliament, whose job, in theory, is to vote on and enact laws proposed by the ruling party.

In practice though, the NPC is widely seen as nothing more than a rubber-stamping body which gives a nod to decisions that have already been made by the Communist Party.

The defence budget increase comes at a time of significant regional tensions.

China is locked in an increasingly bitter territorial dispute with Japan over a set of tiny islands in the East China Sea.

The two countries both hold a territorial claim to the islands and have come close to clashing on several occasions in recent months.

The European Council on Foreign Relations (ECFR) has warned that the dispute is a threat to regional peace.

China has made no secret of its desire to project its power beyond its borders, but it is not alone in increasing its defence budget.

Japan's new Prime Minister Shinzo Abe did the same in January and America has pledged to realign its forces towards the Asia-Pacific region over the coming decade.

The US annual defence budget in 2012 was £418bn, significantly more than China's publicly-stated increase to £76bn.

Senior British diplomatic sources have told Sky News of their concern over the China-Japan dispute.

Premier Wen Jiabao officially steps aside during this congress

The fear is that an accidental clash between the two navies could escalate matters very quickly.

A Japanese diplomat, speaking on condition of anonymity, recently told Sky News that there was currently no "hotline" between the two militaries, increasing the chances of a "misunderstanding".

The opening day of the National Party Congress is traditionally the moment for the outgoing Premier to deliver a speech reflecting on the achievements of the past 5 years.

Premier Wen Jiabao outlined a "truly extraordinary period of time in the course of China's development."

He ran through the figures which characterise China's continued rise over the past five years:

:: GDP up from £2.8tn to £5.5tn.

:: 58.7 million jobs created.

:: 18 million government-subsidised houses built.

:: 19,700km (12,241 miles) of railway laid.

:: 609,000km (378,415 miles) of roads constructed.

:: 31 new airports opened.

Premier Wen, who steps down during this congress, predicted the economy would grow by "around 7.5%" in 2013 but warned of challenges.

"Our country still faces many difficulties and challenges in its economic development in 2013, an we need to work hard if we want to attain a growth target of around 7.5%," he said.

The economy remains the biggest challenge for China. It has largely avoided a direct hit by the global economic crisis but the knock-on effects have slowed manufacturing and exports.

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Pressure On First Buyers As House Prices Rise

By Nick Martin, Sky Correspondent

House prices edged up month-on-month in both January and February this year, bringing good news for homeowners but adding pressure on first-time buyers.

Building society Nationwide said it was cautiously optimistic that activity will pick up in the months ahead.

It comes after reports revealed more young people were living with their parents while trying to save for a deposit for a property. 

According to the Halifax, the average age of a first-time buyer is 30 years old - up from 29 in 2011.

There has been a significant increase in the proportion of first time buyers receiving financial help in recent years.

The Council of Mortgage Lenders (CML) estimate that 65% of first time buyers of had financial assistance in mid 2012 compared with 31% in mid-2005.

Kirsty Gilmore, 26, from Bristol, has been living at home for 18 months and has saved more than £30,000. But that is still not enough to buy a property. She says the market is so competitive it is hard to get a good price.

"I want to have my own place, I want to start a family and have a home to call my own, not just my mum and dad's.

"You feel a bit excluded from society - nobody cares and you're stuck in this rut really - and everyone else my age is," she told Sky News.

Mortgage approvals for home buyers have dipped for the first time since a Government scheme to boost lending was launched last August, Bank of England figures showed.

There were 54,719 approvals in January, showing a 2% decline compared with an 11-month high recorded the previous month and marking the first time that there has been a month-on-month decrease since July.

Mortgage approvals for house purchases had been on a steady upward path since the Government's Funding for Lending scheme, which aims to help borrowers by giving lenders access to cheap finance, was launched at the start of August.

The latest figures echo recent findings from the CML, with some analysts blaming the recent bad weather.

Housing minister Mark Prisk said the Government was trying to help first time buyers get onto the property ladder.

"Many people have to rely on the bank of mum and dad - so what we are trying to do with the builders and the Government by putting equity loans forward is make those deposit affordable for first time buyers. It's already helped 17,000 people. We hope it will help 27,000."

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HSBC Boss Gulliver In Line For £2m Bonus

By Mark Kleinman, City Editor

HSBC is to award its chief executive a bonus of just under £2m for 2012 following a year of successful strategic action to overhaul the bank but which was marred by a £1.2bn fine for violating US money-laundering laws.

I have learned that HSBC, Britain's biggest lender by market capitalisation, will announce on Monday alongside its full-year results that Stuart Gulliver has been awarded the bonus as part of a multimillion pound pay package.

Mr Gulliver intends to accept the award, according to HSBC insiders. His bonus will be deferred and subject to clawback, and he will not be able to cash it in until he retires from or leaves HSBC.

As part of an effort to demonstrate greater transparency over the way it rewards top executives, HSBC will for the first time publish a single figure for the aggregate pay and benefits packages awarded to Mr Gulliver and his most senior colleagues.

This will include pension contributions as well as salary, annual bonus and a long-term share award that has been allotted to him this year. It is designed to show compliance with new Government rules that will come into force later this year, which have been spearheaded by Vince Cable, the Business Secretary.

Douglas Flint, the chairman, Sir Simon Robertson, the deputy chairman, and John Thornton, the non-executive director who chairs the remuneration committee, are understood to have orchestrated the switch to the new disclosure regime ahead of the Government deadline.

For 2011, Mr Gulliver was awarded an annual bonus of just over £2.1m, alongside his base salary of £1.25m and £3.75m in long-term share awards, making a total of £7.2m.

In 2012, his bonus and LTIP are understood to have been determined "in broadly the same ballpark" with a total package worth between £6m and £7m, one person close to the bank said.

HSBC has been applauded by many leading City shareholders for the way it details its executive pay policies through the publication of a 'scorecard' for Mr Gulliver, who took over in 2011.

The chief executive is eligible for an annual bonus of three times his salary and six times his base pay in long-term incentive awards.

A chunk of both payments is determined by HSBC's compliance success and the bank's reputation during a 12-month period. Mr Gulliver is understood to have been awarded nothing in this bracket in 2012, the same outcome as a year earlier, when HSBC was fined for mis-selling bonds to elderly customers.

HSBC suffered one of the most ignominious episodes in its history last year, when it was forced to pay £1.2bn to US regulators to settle money laundering and sanctions breaches which had allowed its Mexican operation to be used by drug cartels and terrorist organisations.

In January, the bank established a committee to bolster its defences against financial crime, recruiting the former heads of HM Revenue and Customs and the Serious Organised Crime Agency, as well as a former US deputy attorney-general.

HSBC will set out plans on Monday to claw back millions of pounds from senior executives deemed to have been culpable in the Mexican situation.

While the bank will not name the affected individuals, they include Sandy Flockhart, the former head of the bank's Asian operation, who was at one stage seen as a contender against Mr Gulliver for the top job.

Mr Flockhart, who left HSBC last year, ran its Mexican subsidiary between 2002 and 2007, and had several million pounds-worth of shares which he is understood to have been told he will not now receive.

I understand, however, that Lord Green, the trade minister who stepped down as HSBC chairman in 2010, will not be included in the clawback effort, partly because he opted to take his long-term pay awards as pension contributions.

Michael Geoghegan, Mr Gulliver's predecessor as chief executive, has also been excluded from the clawback arrangement because the bank's remuneration committee did not conclude that he had been personally responsible for the compliance failings.

The effort to demonstrate pay restraint will be reflected in a lower bonus pool than the £2.8bn that was paid out for 2011, less than a quarter of which was paid to UK employees. HSBC will say on Monday that there has been an across-the-board reduction in the payout pot because of the US fine, although it is still understood to be paying out roughly £2bn in bonuses to staff around the world.

HSBC is also expected to pay a healthy final dividend, with its payouts to shareholders an increasingly-important source of income to UK investors in the context of a banking sector which has seen dividend expenditure shrink dramatically since the financial crisis.

In the UK, HSBC has abandoned a structure for paying staff that saw it impose a £50,000 cap on cash bonuses last year. The scheme involved the bank issuing shares that were then sold immediately in the market to hand executives larger cash sums.

HSBC bosses felt the initiative, devised with the Bank of England and Financial Services Authority, was "cosmetic". Instead, payouts will not include a cash ceiling but larger sums will have to be deferred for several years and won't pay out until employees leave or retire.

Analysts expect HSBC's full-year results to show continued progress under Mr Gulliver at accelerating the pace of change of what had historically been seen as a sluggish supertanker.

He has sold scores of businesses which did not meet internal targets for generating returns and has prioritised growth in the world's fastest-growing economies.

"HSBC has made excellent progress in its strategy to simplify the business and refocus it on growth markets and markets that benefit from international connectivity," analysts at Shore Capital said.

They predict underlying full-year profit of £12.5bn, against £11.8bn in 2011.

HSBC, which declined to comment, is also expected to outline a further provision for compensating customers who were mis-sold payment protection insurance.

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Obama Signs Order To Start Spending Cuts

President Barack Obama has signed an order authorising $85bn cuts in domestic and defence spending following the failure of efforts to strike a deal with Republicans on cutting the US deficit.

Mr Obama and Republican leaders in the House and Senate declared themselves still deadlocked after a last-minute White House meeting last night.

The two sides are at odds over the president's insistence on increasing tax revenue as part of any plan to tackle the country's $16.6trn debt.

Mr Obama signed the order which officially enacts the across-the-board reductions - known as a "sequester" in government budget language. Under the law, the president had until midnight.

The $85bn cuts apply to the remainder of the 2013 fiscal year, which ends on September 30. But the legislation that requires the spending reduction will continue slashing government spending by about $1trn more over a 10-year period.

Speaking after the White House meeting, Mr Obama said: "Let's be clear, none of this is necessary."

He blamed the deadlock on Republicans who he said refused to close tax loopholes that benefit the wealthy, adding that "the pain will be real" for the American people.

"I am not a dictator. I'm the president," Mr Obama said, warning he could not force his Republican foes to "do the right thing," or make the Secret Service barricade Republicans leaders in a room until a deal is done.

"These cuts will hurt our economy, will cost us jobs and to set it right both sides need to be able to compromise," Mr Obama added.

US Speaker of the House John Boehner walked out of the meeting

Republican John Boehner, speaker of the House of Representatives, walked out of the meeting to say there would be no compromise as long as Mr Obama insisted on higher tax revenue.

Republicans are standing fast against further increasing taxes and will not compromise on achieving debt reduction through spending cuts alone.

The opposition party is still feeling the sting from its most conservative members after agreeing at the end of 2012 to allow the expiration of Bush-era tax cuts for Americans earning $400,000 or more a year.

Friday's meeting was the first the two sides have held this year on the budget battle, and it lasted less than an hour.

The immediate impact of the cuts on the public is uncertain, but they will carve 5% from domestic agencies and 8% from the Pentagon between now and October 1.

Defence officials say they will be forced to reduce the working week of 800,000 civilian employees, scale back flight hours of warplanes and postpone some equipment maintenance.

The deployment of a second aircraft carrier to the Persian Gulf has also been cancelled.

The US Navy will gradually stand down several hundred planes starting in April, the Air Force will curtail flying hours and the Army will cut back training for all units except those deploying to Afghanistan.

Several major programmes will be unaffected, including the Social Security pension programme, the Medicaid health care programme for the poor and food stamps.

Pentagon chief Chuck Hagel warned that the budget cuts will endanger the US military's ability to conduct its missions.

"This will have a major impact on training and readiness," he said. "Later this month, we intend to issue preliminary notifications to thousands of civilian employees who will be furloughed."

Mr Hagel also acknowledged that the budget cuts "will cause pain, particularly among our civilian workforce and their families".

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Bankers' Bonuses: EU Agrees Cap On Payments

European Union officials have agreed a provisional deal to cap bankers' bonuses, despite the UK Government's efforts to protect the country's dominant financial services sector.

The plan would see the maximum payout set at a year's salary but that could be increased to two year's salary with shareholder approval.

The Treasury opposed the idea because it feared that limits could cost jobs in the City and prompt firms to leave for more favourable shores.

The measures are part of a sweeping overhaul of EU banking rules, which are designed to ensure that banks in the future have enough capital to withstand financial shocks.

Wednesday night's agreement, reached during an eight-hour session between EU lawmakers, the EU Commission and representatives of the bloc's 27 governments in Brussels, ensures the package can take effect next year.

Currently there is no legal pay limit on top bankers and traders, who can earn performance bonuses many times their base salaries.

But public outrage has grown across Europe over large payments to executives of banks that received huge state bailouts during the financial crisis.

Supporters of the bonus cap say the payments encouraged bankers to take massive risks at the expense of the long-term future of their businesses, which helped to destabilise the financial system.

Othmar Karas, the European Parliament's chief negotiator, said: "For the first time in the history of EU financial market regulation, we will cap bankers' bonuses.

"The essence is that from 2014, European banks will have to set aside more money to be more stable and concentrate on their core business, namely financing the real economy, that of small and medium-sized enterprises and jobs."

Final approval by parliament and government leaders of the package is expected to be a formality.

Britain had tried to rally other EU governments behind its position but failed to garner enough support.

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